1. The First Maritime Traders | |
Phoenicians | These seafaring Phoenicians were the first maritime traders, selling purple dye to four corners of the world (as in the Arabian Night and the Bible). They also invented the alphabet. Subsequently, through trade with these Phoenicians, Jews developed the Hebrew script, a variant of the Phoenician alphabet. The Phoenician alphabet was mostly consonantal (i.e., abjad). They had a trade monopoly, shipping goods from one location to another in the Mediteranean Sea. (Other races did not have the navigation skills then.) Likewise, the Hebrew script was consonental, except for aleph and vav, the latter serving not only as a consonant (v or w as in the tetragrammaton, YHWH) but also as an indeterminate vowel (o or u). |
Around 1600 BC, the Phoenicians living in Tyre, Lebanon got tired of fighting against Amorites, and migrated to Crete. Cretans welcomed the Phoenicians because of their advanced culture (improved homes and palaces, e.g., Later, Solomon's temple was built by Phoenicians.) Because of frequent earthquakes (in 1628 and another around 1500 BC), the Phoenicians/Canaanites left Crete, and went back to Lebanon. (The Peace Encyclopedia). Cretan murals are found in Israel, Lebanon and Egypt. Phoenicians/Cretans made great contributions to human civilization: (i) Phoenicians invented the alphabet (all consonants), (ii) Cretans invented plumbing, which is essential to comfort in modern houses, and (iii) created an architectural style with columns. |
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Life in the Knossos Palace |
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columns | These columns are about 4000 years old. These architectural styles are copied by the Western people ever since. |
larnax |
A Minoan larnax (bathtub). It appears our bathtubs were an idea borrowed from Cretans. Crete was plumbers' paradise. Their houses had fresh water indoor plumbing. The diameter of terracotta drain pipes were 4 - 6 inches. |
ritual purification |
Lustral basin for purification. The Greek bath was for ritual purification. |
Romans copied: Typical Roman house with peristyle |
peristyle of Predia Iulia Felix, Pompeii. The compluvium lets the rainwater into the impluvium (sunken part on the floor). Trade promotes exchange of ideas. Countries adopt the technology and culture of a superior economy. |
3. The HO Theorem | |
If assumptions (1) - (10) are satisfied, then each country exports the commodity which intensively uses its abundant factor. Implication: The price of the exportable is higher than that in autarky. (By SS Theorem, free trade raises the return to the abundant factor, which is intensively used in the export sector. In other words, free trade benefits the abundant factor and hurts the scarce factor. |
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Example | For example, if China is abundant in labor, it will export the labor-intensive product to the US. If the United States is capital abundant, it will export the capital-intensive product to China. Planning errors may induce countries to export wrong commodities and cause mass starvation. In the Soviet famine of 1932-33, Stalin expected collective farms would increase output and exported grains at first. As a result, 6-8 million people died of starvation. To prove the HO Theorem, we first need some definitions. |
Absolute (physical) Abundance
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Home Country is abundant in labor if
L/K > L*/K* Figure 2. Abundance in labor. K/L > K*/L*. |
Proof of the HO Theorem | Remark: (i) The relative supply curve, y1/y2(p1/p2) is positively sloped, because supply of y1 is positively related to p1/p2 whereas supply of y2 is negatively related to p1/p2. (ii) Similarly, the relative demand curve x1/x2(p1/p2) is negatively sloped as shown above because demand for x1 is negatively related to p1/p2 whereas demand for x2 is positively related to p1/p2. (iii) Since consumers in the two countries have identical preferences, relative demand are identical, i.e., x1/x2 = x*1/x*2 . However, while the relative supplies, y1/y2, is larger than y*1/y*2 because HC is labor-abundant. |
Relative demand and supply |
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HO Theorem |
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Chart: Economagic